Here’s How China Can Escalate a Trade War With the U.S.3:01

China has pledged to retaliate against U.S. tariffs in “equal scale and equal strength.” In addition to tariffs, here are three ways Beijing could hit back at Washington. Photo: Getty Images

July 3rd 2018

8 months ago

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Donald Trump’s trade war with China is about to become a reality.Source:AP

DONALD Trump’s trade war with China is about to become a reality.

After months of back-and-forth threats between the two powers, steep US tariffs on tens of billions in Chinese goods will come into effect at midnight tonight.

WHAT’S GOING ON?

Last month, the White House announced plans to stick 25 per cent tariffs on 1100 Chinese goods.

Starting at midnight tonight, the US will tax 818 Chinese products — worth a total of $US34 billion ($AU46 billion) per year.

The remaining products will remain off the list until after the government has assessed the situation.

China is not happy about this, and Beijing has vowed to retaliate with the same value: 25 per cent tariffs on US products worth $US34 billion per year, including soybeans, seafood and crude oil.

Each side has threatened further tariffs on the other if tensions continue to escalate, sparking fears of an all-out ongoing global trade war.

WHY IS THIS EVEN HAPPENING?

Tensions have been building between China and the US on a range of issues, from trade to America’s military presence in the South China Sea, which Beijing has repeatedly threatened them on.

The Trump administration has accused China of using predatory tactics in a lawless drive to overtake America’s technological supremacy.

After months of back-and-forth threats between the two powers, steep US tariffs on tens of billions in Chinese goods will come into effect at midnight tonight.Source:AFP

The US feels threatened by China’s “Made In China 2025” plan, a long-range development plan for creating powerful Chinese entities in such areas as information technology, robotics, aerospace equipment, electric vehicles and biopharmaceuticals.

Foreign business groups argue that “Made in China 2025” is unfairly forcing them to the sidelines in those industries.

The Office of the US Trade Representative concluded after an investigation that China’s tactics range from requiring US and other foreign companies to hand over technology in return for access to the vast Chinese market to outright cyber-theft.

The US also argues Beijing uses state money to buy American technology at prices unaffordable for private companies.

WHAT WILL BE THE EFFECTS?

If it escalates further, the US-China trade war is expected to have global consequences.

European businesses fear it could spell the biggest single threat to the economic upswing that helped the region get past its financial crisis.

Meanwhile, the Chinese yuan has taken a dive, with the currency hitting an 11-month low yesterday, given investors and traders are uncertain about the tensions between the two countries.

If it escalates further, the US-China trade war is expected to have global consequences.Source:AP

The Chinese government has warned the US tariffs will not only hurt China and the US, but the rest of the world, because $20 billion of the affected $34 billion goods are produced by foreign companies.

In the US, it’s expected that American farmers — who overwhelmingly backed Mr Trump in the 2016 election — will be hit hardest, with the US products targeted by Beijing heavily related to agriculture.

Economists have also warned that a fully fledged trade war will slow the US economy, and many individual businesses could soon endure hardship as a result.

Canada, Mexico and the European Union have also placed retaliatory tariffs on the US.

WHAT ABOUT AUSTRALIA?

Australia was given a special exemption from the trade war in March, after the government frantically lobbied for exclusion from a 25 per cent tariff on steel and 10 per cent tariff on aluminium.

“We have a very close relationship with Australia, we have a trade surplus with Australia. Great country, long term partner, we’ll be doing something with them,” Mr Trump said at the time.

But escalating tensions between China and the US, our first and third-largest trading partners respectively, is definitely not in Australia’s best interests.

Last month, both sides of the Australian Parliament found common ground over their concerns for the US trade war.

This trade war is not in Australia’s interests.Source:News Corp Australia

Foreign Minister Julie Bishop expressed her concern over the “tit-for-that” nature of the measures, but noted that Australia’s position had been made clear.

“It is of concern and Australia will continue to advocate for free and open trade and investment because that is of great benefit to our country and free trade has benefited the world,” she said. “It is a position that we have made very clear to our American friends and will continue to promote free and open trade and investment.”

Penny Wong said the US decision to go after China was a “very negative development”.

“It is a negative development because it strikes at the integrity of the world trading system which has served the world well, which has ensure disputes are managed and contained, which has ensured that we don’t get into escalating economic fights,” she told the ABC last month. “I think it is a negative thing because trade, conflict in the trading relationship, risks some instability in the broader bilateral relationship.

“We have to continue to assert why the trading system matters and we have to continue to try and ensure that this doesn’t escalate.”